<PAGE>
Filed Pursuant to Rule 497(e)
Registration File No.: 811-2979
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PROSPECTUS - MAY 1, 1999
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MORGAN STANLEY DEAN WITTER
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TAX-EXEMPT SECURITIES TRUST
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A MUTUAL FUND THAT SEEKS TO PROVIDE A HIGH LEVEL OF
CURRENT INCOME EXEMPT FROM FEDERAL INCOME TAX,
CONSISTENT WITH THE PRESERVATION OF CAPITAL
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation to
the contrary is a criminal offense.
<PAGE>
CONTENTS
The Fund Investment Objective ........................... 1
Principal Investment Strategies ................ 1
Principal Risks ................................ 2
Past Performance ............................... 4
Fees and Expenses .............................. 5
Additional Investment Strategy Information ..... 6
Additional Risk Information .................... 7
Fund Management ................................ 8
Shareholder Information Pricing Fund Shares ............................ 9
How to Buy Shares .............................. 9
How to Exchange Shares ......................... 11
How to Sell Shares ............................. 13
Distributions .................................. 15
Tax Consequences ............................... 15
Share Class Arrangements ....................... 17
Financial Highlights ................................................ 24
Our Family of Funds ................................. Inside Back Cover
This Prospectus contains important information
about the Fund. Please read it carefully and keep
it for future reference.
FUND CATEGORY
--------------
[ ] Growth
[ ] Growth and Income
[X] INCOME
[ ] Money Market
<PAGE>
THE FUND
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INVESTMENT OBJECTIVE
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Morgan Stanley Dean Witter Tax-Exempt Securities Trust (the "Fund") is a mutual
fund that seeks to provide a high level of current income exempt from federal
income tax, consistent with the preservation of capital. There is no guarantee
that the Fund will achieve this objective.
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PRINCIPAL INVESTMENT STRATEGIES
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The Fund will normally invest at least 80% of its assets in securities that pay
interest exempt from federal income taxes. The Fund's "Investment Manager,"
Morgan Stanley Dean Witter Advisors Inc., generally invests the Fund's assets in
municipal obligations. Municipal obligations are bonds, notes or short-term
commercial paper issued by state governments, local governments, and their
respective agencies. At least 75% of these municipal obligations will have the
following ratings at the time of purchase:
(sidebar)
INCOME
An investment objective having the goal of selecting securities to pay out
income rather than rise in value.
(end sidebar)
o municipal bonds -- within the three highest grades by Moody's
Investors Service Inc. ("Moody's"), Standard &
Poor's Corporation ("S&P"), or Fitch IBCA, Inc.
("Fitch");
o municipal notes -- within the two highest grades or, if not rated,
have outstanding bonds within the three highest
grades by Moody's, S&P or Fitch; and
o municipal commercial paper -- within the highest grade by Moody's, S&P or
Fitch.
The Fund may invest up to 25% of its assets in municipal obligations that are
rated below the limits stated above or are not rated by those rating agencies.
However, the Fund may only invest up to 5% of its assets in municipal
obligations rated below investment grade or, if unrated, of comparable quality
as determined by the Investment Manager (commonly known as "junk bonds").
The Fund may invest up to 20% of its assets in taxable money market instruments
or securities that pay interest income subject to the "alternative minimum tax,"
and some taxpayers may have to pay tax on a Fund distribution of this income.
The Fund therefore may not be a suitable investment for these investors. See the
"Tax Consequences" section for more details.
Municipal bonds, notes and commercial paper are commonly classified as either
"general obligation" or "revenue." General obligation bonds, notes, and
commercial paper are secured by the issuer's faith and credit, as well as its
taxing power, for payment of principal and interest. Revenue bonds, notes and
commercial paper,
1
<PAGE>
however, are generally payable from a specific source of income. They are issued
to fund a wide variety of public and private projects in sectors such as
transportation, education and industrial development. Included within the
revenue category are participations in lease obligations. The Fund's municipal
obligation investments may include zero coupon securities, which are purchased
at a discount and make no interest payments until maturity.
In addition to the securities described above, the Fund may also invest in
futures.
In pursuing the Fund's investment objective, the Investment Manager has
considerable leeway in deciding which investments it buys, holds or sells on a
day-to-day basis -- and which investment strategies it uses. For example, the
Investment Manager in its discretion may determine to use some permitted
investment strategies while not using others.
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PRINCIPAL RISKS
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The Fund's share price will fluctuate with changes in the market value of the
Fund's portfolio securities. When you sell Fund shares, they may be worth less
than what you paid for them and, accordingly, you can lose money investing in
this Fund.
Credit and Interest Rate Risks. Municipal obligations, like other debt
securities, are subject to two types of risks: credit risk and interest rate
risk.
Credit risk refers to the possibility that the issuer of a security will be
unable to make interest payments and/or repay the principal on its debt. In the
case of revenue bonds, notes or commercial paper, for example, the credit risk
is the possibility that the user fees from a project or other specified revenue
sources are insufficient to meet interest and/or principal payment obligations.
The issuers of private activity bonds, used to finance projects in sectors such
as industrial development and pollution control, also may be negatively impacted
by the general credit of the user of the project.
Interest rate risk refers to fluctuations in the value of a fixed-income
security resulting from changes in the general level of interest rates. When the
general level of interest rates goes up, the prices of most fixed-income
securities go down. When the general level of interest rates goes down, the
prices of most fixed-income securities go up. Zero coupon securities are
typically subject to greater price fluctuations than comparable securities that
pay current interest. As a general illustrative of the relationship between
fixed-income securities and interest rates, the following table shows how
interest rates affect bond prices.
2
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HOW INTEREST RATES AFFECT BOND PRICES
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PRICE PER $1,000 OF A MUNICIPAL BOND
IF INTEREST RATES:
------------------------------------
INCREASE* DECREASE**
------------------------------------
BOND MATURITY COUPON 1% 2% 1% 2%
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1 Year 1999 3.00% $990 $981 $1,010 $1,020
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5 Years 2003 3.75% $956 $914 $1,046 $1,095
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10 Years 2008 4.10% $922 $852 $1,085 $1,180
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20 Years 2018 4.90% $883 $785 $1,138 $1,302
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30 Years 2028 4.95% $861 $749 $1,175 $1,396
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Source: Municipal Market Data (a division of Thomson Financial
Municipal Group); "Aaa" yield curve as of 12/31/98.
* Assumes no effect from market discount calculation.
** Assumes bonds are non-callable.
The Fund is not limited as to the maturities of the municipal obligations in
which it may invest. Thus, a rise in the general level of interest rates may
cause the price of the Fund's portfolio securities to fall substantially.
Other Risks. The performance of the Fund also will depend on whether the
Investment Manager is successful in pursuing the Fund's investment strategy. The
Fund is also subject to other risks from its permissible investments including
the risks associated with its futures and lease obligations investments.
Shares of the Fund are not bank deposits and are not guaranteed or insured by
any bank, governmental entity, or the FDIC.
3
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PAST PERFORMANCE
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The bar chart and table below provide some indication of the risks of investing
in the Fund. The Fund's past performance does not indicate how the Fund will
perform in the future.
ANNUAL TOTAL RETURNS -- CALENDAR YEARS
1989 '90 '91 '92 '93 '94 '95 '96 '97 '98
---- --- --- --- --- --- --- --- --- ---
10.61% 5.86% 12.71% 9.09% 11.23% -5.55% 17.37% 3.61% 8.73% 6.11%
The bar chart reflects the performance of Class D shares. All shares held prior
to the Fund adopting its Multi-Class Structure on July 28, 1997 were designated,
Class D Shares. The performance of the other Classes will differ because the
Classes have different ongoing fees.
(sidebar)
ANNUAL TOTAL RETURNS
This chart shows how the performance of the Fund's Class D shares has varied
from year to year over the last 10 calendar years.
(end sidebar)
During the periods shown in the bar chart, the highest return for a calendar
quarter was 6.89% (quarter ended March 31, 1995) and the lowest return for a
calendar quarter was --5.50% (quarter ended March 31, 1994). Year-to-date total
return as of March 31, 1999 was 0.63%.
(sidebar)
AVERAGE ANNUAL TOTAL RETURNS
This table compares the Fund's average annual returns with those of a broad
measure of market performance over time. The Fund's returns include the maximum
applicable sales charge for each Class and assume you sold your shares at the
end of each period.
(end sidebar)
AVERAGE ANNUAL TOTAL RETURNS (FOR THE PERIOD ENDED THE 1998 CALENDAR YEAR)
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PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
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Class A 1.36% -- --
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Class B 0.50% -- --
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Class C 4.37% -- --
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Class D(1) 6.11% 5.79% 7.81%
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Lehman Brothers Municipal Bond
Index(2) 6.48% 6.22% 8.22%
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Lipper General Municipal Debt
Funds Index(3) 5.64% 5.70% 7.75%
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(1) Prior to July 28, 1997, the Fund only issued Class D shares.
(2) The Lehman Brothers Municipal Bond Index tracks the performance of Municipal
bonds with maturities of 2 years or more and a minimum credit rating of Baa
or BBB, as measured by Moody's Investor Service, Inc. or Standard & Poor's
Corp. The Index does not include any expenses, fees, or changes. The Index
is unmanaged and should not be considered an investment.
(3) The Lipper General Municipal Debt Funds Index is an equally-weighted
performance index of the largest qualifying funds (based on net assets) in
the Lipper General Municipal Debt Funds objective. The Index, which is
adjusted for capital gains distributions and income dividends, is unmanaged
and should not be considered an investment. There are currently 30 funds
represented in this index.
4
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FEES AND EXPENSES
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The Fund offers four Classes of shares: Classes A, B, C and D. Each Class has a
different combination of fees, expenses and other features. The table below
briefly describes the fees and expenses that you may pay if you buy and hold
shares of the Fund. The Fund does not charge account or exchange fees. See the
"Share Class Arrangements" section for further fee and expense information.
(sidebar)
SHAREHOLDER FEES
These fees are paid directly from your investment.
(end sidebar)
(sidebar)
ANNUAL FUND OPERATING EXPENSES
These expenses are deducted from the Fund's assets and are based on expenses
paid for the fiscal year ended December 31, 1998.
(end sidebar)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
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<S> <C> <C> <C> <C>
SHAREHOLDER FEES
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Maximum sales charge (load) imposed on
purchases (as a percentage of offering price) 4.25%(1) None None None
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Maximum deferred sales charge (load) (as a
percentage based on the lesser of the offering
price or net asset value at redemption) None(2) 5.00%(3) 1.00%(4) None
- ------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
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Management fee 0.43% 0.43% 0.43% 0.43%
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Distribution and service (12b-1) fees 0.24% 0.60% 0.70% None
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Other expenses 0.07% 0.07% 0.07% 0.07%
- ------------------------------------------------------------------------------------------------
Total annual Fund operating expenses 0.74% 1.10% 1.20% 0.50%
- ------------------------------------------------------------------------------------------------
</TABLE>
(1) Reduced for purchases of $25,000 and over.
(2) Investments that are not subject to any sales charge at the time of purchase
are subject to a contingent deferred sales charge ("CDSC") of 1.00% that
will be imposed on sales made within one year after purchase, except for
certain specific circumstances.
(3) The CDSC is scaled down to 1.00% during the sixth year, reaching zero
thereafter. See "Share Class Arrangements" for a complete discussion of the
CDSC.
(4) Only applicable to sales made within one year after purchase.
5
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EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund, your investment has a
5% return each year, and the Fund's operating expenses remain the same. Although
your actual costs may be higher or lower, the tables below show your costs at
the end of each period based on these assumptions depending upon whether or not
you sell (redeem) your shares at the end of each period.
IF YOU SOLD YOUR SHARES IF YOU HELD YOUR SHARES
- ------------------------------------------- ----------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------- ----------------------------------
CLASS A $497 $651 $818 $1,302 $497 $651 $818 $1,302
- ------------------------------------------- ----------------------------------
CLASS B $612 $649 $805 $1,337 $112 $349 $605 $1,337
- ------------------------------------------- ----------------------------------
CLASS C $222 $380 $607 $1,450 $122 $380 $657 $1,450
- ------------------------------------------- ----------------------------------
CLASS D $51 $160 $278 $625 $51 $160 $278 $625
- ------------------------------------------- ----------------------------------
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ADDITIONAL INVESTMENT STRATEGY INFORMATION
- ------------------------------------------
The Fund's investment objective is to seek to provide a high level of current
income exempt from federal income tax, consistent with the preservation of
capital. There is no guarantee that the Fund will achieve its objective.
This section provides additional information concerning the Fund's principal
strategies.
Lease Obligations. Included within the revenue bonds category are participations
in lease obligations or installment purchase contracts of municipalities.
Generally, state and local agencies or authorities issue lease obligations to
acquire equipment and facilities for public and private purposes.
Futures. The Fund may purchase or sell futures contracts with respect to
financial instruments and municipal bond indexes. Futures may be used to seek to
hedge against interest rate changes.
Defensive Investing. The Fund may take temporary "defensive" positions in
attempting to respond to adverse market conditions. The Fund may invest any
amount of its assets in taxable securities, or in tax-exempt securities subject
to the federal alternative minimum tax for individual shareholders when the
Investment Manager believes it is advisable to do so. Although taking a
defensive posture is designed to protect the Fund from an anticipated market
downturn, it could have the effect of reducing the Fund's ability to provide
tax-exempt income.
6
<PAGE>
[GRAPHIC OMITTED]
ADDITIONAL RISK INFORMATION
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This section provides additional information regarding the principal risks of
investing in the Fund.
Bond Insurance Risk. Many of the municipal obligations the Fund invests in will
be covered by insurance at the time of issuance or at a later date. Such
insurance covers the remaining term of the security. Insured municipal
obligations would generally be assigned a lower rating if the rating were based
primarily on the credit quality of the issuer without regard to the insurance
feature. If the claims-paying ability of the insurer were downgraded, the
ratings on the municipal obligations it insures may also be downgraded.
Lease Obligations. Lease obligations may have risks not normally associated with
general obligation or other revenue bonds. Leases and installment purchase or
conditional sale contracts (which may provide for title to the leased asset to
pass eventually to the issuer) have developed, in part, as a means for
governmental issuers to acquire property and equipment without the necessity of
complying with the constitutional and statutory requirements generally
applicable for the issuance of debt. Certain lease obligations contain
"non-appropriation" clauses that provide that the governmental issuer has no
obligation to make future payments under the lease or contract unless money is
appropriated for that purpose by the appropriate legislative body on an annual
or other periodic basis. Consequently, continued lease payments on those lease
obligations containing "non-appropriation" clauses are dependent on future
legislative actions. If these legislative actions do not occur, the holders of
the lease obligation may experience difficulty in exercising their rights,
including disposition of the property.
Futures. If the Fund purchases or sells in futures contracts, its participation
in these markets would subject the Fund's portfolio to certain risks. The
Investment Manager's predictions of movements in the direction of interest rate
markets may be inaccurate, and the adverse consequences to the Fund (e.g., a
reduction in the Fund's net asset value or a reduction in the amount of income
available for distribution) may leave the Fund in a worse position than if these
strategies were not used. Other risks inherent in the use of futures include,
for example, the possible imperfect correlation between the price of futures
contracts and movements in the prices of the securities being hedged, and the
possible absence of a liquid secondary market for any particular instrument. The
risk of imperfect correlations may be increased by the fact that futures
contracts in which the Fund may invest are taxable securities rather than
tax-exempt securities. The prices of taxable securities may not move in a
similar manner to prices of tax-exempt securities.
Year 2000. The Fund could be adversely affected if the computer systems
necessary for the efficient operation of the Investment Manager, the Fund's
other service providers
7
<PAGE>
and the markets and individual and governmental issuers in which the Fund
invests do not properly process and calculate date-related information from and
after January 1, 2000. While year 2000-related computer problems could have a
negative effect on the Fund, the Investment Manager and affiliates are working
hard to avoid any problems and to obtain assurances from their service providers
that they are taking similar steps.
In addition, it is possible that the markets for securities in which the Fund
invests may be detrimentally affected by computer failures throughout the
financial services industry beginning January 1, 2000. Improperly functioning
trading systems may result in settlement problems and liquidity issues. In
addition, governmental data processing errors may result in overall economic
uncertainties. Earnings of individual issuers will be affected by remediation
costs, which may be substantial. Accordingly, the Fund's investments may be
adversely affected.
[GRAPHIC OMITTED]
FUND MANAGEMENT
- ---------------
The Fund has retained the Investment Manager -- Morgan Stanley Dean Witter
Advisors Inc. -- to provide administrative services, manage its business affairs
and invest its assets, including the placing of orders for the purchase and sale
of portfolio securities. The Investment Manager is a wholly-owned subsidiary of
Morgan Stanley Dean Witter & Co., a preeminent global financial services firm
that maintains leading market positions in each of its three primary businesses:
securities, asset management and credit services. Its main business office is
located at Two World Trade Center, New York, New York 10048.
(sidebar)
MORGAN STANLEY DEAN WITTER ADVISORS INC.
The Investment Manager is widely recognized as a leader in the mutual fund
industry and together with Morgan Stanley Dean Witter Services Company Inc.,
its wholly-owned subsidiary, has more than $129 billion in assets under
management or administration as of March 31, 1999.
(end sidebar)
The Fund's portfolio is managed within the Investment Manager's Tax-Exempt
Group. James F. Willison, a Senior Vice President of the Investment Manager, has
been a primary portfolio manager of the Fund since its inception. Joseph R.
Arcieri, a Vice President of the Investment Manager, has been a primary
portfolio manager of the Fund since February 1997. Mr. Willison and Mr. Arcieri
have been portfolio managers with the Investment Manager for over five years.
The Fund pays the Investment Manager a monthly management fee as full
compensation for the services and facilities furnished to the Fund, and for Fund
expenses assumed by the Investment Manager. The fee is based on the Fund's
average daily net assets. For the fiscal year ended December 31, 1998, the Fund
accrued total compensation to the Investment Manager amounting to 0.43% of the
Fund's average daily net assets.
8
<PAGE>
SHAREHOLDER INFORMATION
[GRAPHIC OMITTED]
PRICING FUND SHARES
- -------------------
The price of Fund shares (excluding sales charges), called "net asset value," is
based on the value of the Fund's portfolio securities. While the assets of each
Class are invested in a single portfolio of securities, the net asset value of
each Class will differ because the Classes have different ongoing distribution
fees.
The net asset value per share of the Fund is determined once daily at 4:00 p.m.
Eastern time, on each day that the New York Stock Exchange is open (or, on days
when the New York Stock Exchange closes prior to 4:00 p.m., at such earlier
time). Shares will not be priced on days that the New York Stock Exchange is
closed.
The value of the Fund's portfolio securities (except for short-term taxable debt
securities and certain other investments) are valued by an outside independent
pricing service. The service uses a computerized grid matrix of tax-exempt
securities and its evaluations in determining what it believes is the fair value
of the portfolio securities. The Fund's Board of Trustees believes that timely
and reliable market quotations are generally not readily available to the Fund
to value tax-exempt securities and the valuations that the pricing service
supplies are more likely to approximate the fair value of the securities.
An exception to the Fund's general pricing policy concerns its short-term debt
securities. Debt securities with remaining maturities of sixty days or less at
the time of purchase are valued at amortized cost. However, if the cost does not
reflect the securities' market value, these securities will be valued at their
fair value.
[GRAPHIC OMITTED]
HOW TO BUY SHARES
- -----------------
You may open a new account to buy Fund shares or buy additional Fund shares for
an existing account by contacting your Morgan Stanley Dean Witter Financial
Advisor. Your Financial Advisor or other authorized financial representative
will assist you, step-by-step, with the procedures to invest in the Fund. You
may also purchase shares directly by calling the Fund's transfer agent and
requesting an application.
(sidebar)
CONTACTING A FINANCIAL ADVISOR
If you are new to the Morgan Stanley Dean Witter Family of Funds and would like
to contact a Financial Advisor, call (800) THE-DEAN for the telephone number of
the Morgan Stanley Dean Witter office nearest you. You may also access our
office locator on our Internet site at: www.deanwitter.com/funds
(end sidebar)
Because every investor has different immediate financial needs and long-term
investment goals, the Fund offers investors four Classes of shares: Classes A,
B, C and D. Class D shares are only offered to a limited group of investors.
Each Class of shares offers a distinct structure of sales charges, distribution
and service fees, and other features that are designed to address a variety of
needs. Your Financial Advisor or other authorized financial representative can
help you decide which Class may be most appropriate for you. When purchasing
Fund shares, you must specify which Class of shares you wish to purchase.
9
<PAGE>
When you buy Fund shares, the shares are purchased at the next share price
calculated (less any applicable front-end sales charge for Class A shares) after
we receive your investment order in proper form. We reserve the right to reject
any order for the purchase of Fund shares.
(sidebar)
EASYINVESTSM
A purchase plan that allows you to transfer money automatically from your
checking or savings account or from a Money Market Fund on a semi-monthly,
monthly or quarterly basis. Contact your Morgan Stanley Dean Witter Financial
Advisor for further information about this service.
(end sidebar)
MINIMUM INVESTMENT AMOUNTS
- --------------------------------------------------------------------------------
MINIMUM INVESTMENT
--------------------------
INVESTMENT OPTIONS INITIAL ADDITIONAL
- --------------------------------------------------------------------------------
Regular Accounts $1,000 $ 100
- --------------------------------------------------------------------------------
EasyInvestSM
(Automatically from your
checking or savings account
or Money Market Fund) $ 100* $ 100*
- --------------------------------------------------------------------------------
* Provided your schedule of investments totals $1,000 in twelve months.
There is no minimum investment amount if you purchase Fund shares through:
(1) the Investment Manager's mutual fund asset allocation plan, (2) a program,
approved by the Fund's distributor, in which you pay an asset-based fee for
advisory, administrative and/or brokerage services, or (3) employer-sponsored
employee benefit plan accounts.
Investment Options for Certain Institutional and Other Investors/Class D Shares.
To be eligible to purchase Class D shares, you must qualify under one of the
investor categories specified in the "Share Class Arrangements" section of this
Prospectus.
Three Day Settlement. Fund shares are sold through the Fund's distributor,
Morgan Stanley Dean Witter Distributors Inc., on a normal three business day
basis; that is, your payment for Fund shares is due on the third business day
(settlement day) after you place a purchase order.
Subsequent Investments Sent Directly to the Fund. In addition to buying
additional Fund shares for an existing account by contacting your Morgan Stanley
Dean Witter Financial Advisor, you may send a check directly to the Fund. To buy
additional shares in this manner:
o Write a "letter of instruction" to the Fund specifying the name(s) on the
account, the account number, the social security or tax identification
number, the Class of shares you wish to purchase and the investment amount
(which would include any applicable front-end sales charge). The letter must
be signed by the account owner(s).
o Make out a check for the total amount payable to: Morgan Stanley Dean Witter
Tax-Exempt Securities Trust.
o Mail the letter and check to Morgan Stanley Dean Witter Trust FSB at P.O.
Box 1040, Jersey City, NJ 07303.
10
<PAGE>
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HOW TO EXCHANGE SHARES
- ----------------------
Permissible Fund Exchanges. You may exchange shares of any Class of the Fund for
the same Class of any other continuously offered Multi-Class Fund, or for shares
of a No-Load Fund, Money Market Fund or Short-Term U.S. Treasury Trust, without
the imposition of an exchange fee. See the inside back cover of this Prospectus
for each Morgan Stanley Dean Witter Fund's designation as a Multi-Class Fund,
No-Load Fund or Money Market Fund. If a Morgan Stanley Dean Witter Fund is not
listed, consult the inside back cover of that Fund's Prospectus for its
designation. For purposes of exchanges, shares of FSC Funds (subject to a
front-end sales charge) are treated as Class A shares of a Multi-Class Fund.
Exchanges may be made after shares of the Fund acquired by purchase have been
held for thirty days. There is no waiting period for exchanges of shares
acquired by exchange or dividend reinvestment. The current Prospectus for each
fund describes its investment objective(s), policies and investment minimums,
and should be read before investment.
Exchange Procedures. You can process an exchange by contacting your Morgan
Stanley Dean Witter Financial Advisor or other authorized financial
representative. Otherwise, you must forward an exchange privilege authorization
form to the Fund's transfer agent -- Morgan Stanley Dean Witter Trust FSB -- and
then write the transfer agent or call (800) 869-NEWS to place an exchange order.
You can obtain an exchange privilege authorization form by contacting your
Financial Advisor or other authorized financial representative, or by calling
(800) 869-NEWS. If you hold share certificates, no exchanges may be processed
until we have received all applicable share certificates.
An exchange to any Morgan Stanley Dean Witter Fund (except a Money Market Fund)
is made on the basis of the next calculated net asset values of the Funds
involved after the exchange instructions are accepted. When exchanging into a
Money Market Fund, the Fund's shares are sold at their next calculated net asset
value and the Money Market Fund's shares are purchased at their net asset value
on the following business day.
The Fund may terminate or revise the exchange privilege upon required notice.
Certain services normally available to shareholders of Money Market Funds,
including the check writing privilege, are not available for Money Market Fund
shares you acquire in an exchange.
Telephone Exchanges. For your protection when calling Morgan Stanley Dean Witter
Trust FSB, we will employ reasonable procedures to confirm that exchange
instructions communicated over the telephone are genuine. These procedures may
include requiring various forms of personal identification such as name, mailing
address, social security or other tax identification number. Telephone
instructions also may be recorded.
11
<PAGE>
Telephone instructions will be accepted if received by the Fund's transfer agent
between 9:00 a.m. and 4:00 p.m. Eastern time, on any day the New York Stock
Exchange is open for business. During periods of drastic economic or market
changes, it is possible that the telephone exchange procedures may be difficult
to implement, although this has not been the case with the Fund in the past.
Margin Accounts. If you have pledged your Fund shares in a margin account,
contact your Morgan Stanley Dean Witter Financial Advisor or other authorized
financial representative regarding restrictions on the exchange of such shares.
Tax Considerations of Exchanges. If you exchange shares of the Fund for shares
of another Morgan Stanley Dean Witter Fund there are important tax
considerations. For tax purposes, the exchange out of the Fund is considered a
sale of Fund shares -- and the exchange into the other Fund is considered a
purchase. As a result, you may realize a capital gain or loss.
You should review the "Tax Consequences" section and consult your own tax
professional about the tax consequences of an exchange.
Frequent Exchanges. A pattern of frequent exchanges may result in the Fund
limiting or prohibiting, at its discretion, additional purchases and/or
exchanges. The Fund will notify you in advance of limiting your exchange
privileges.
CDSC Calculations on Exchanges. See the "Share Class Arrangements" section of
this Prospectus for a further discussion of how applicable contingent deferred
sales charges (CDSCs) are calculated for shares of one Morgan Stanley Dean
Witter Fund that are exchanged for shares of another.
For further information regarding exchange privileges, you should contact your
Morgan Stanley Dean Witter Financial Advisor or call (800) 869-NEWS.
12
<PAGE>
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HOW TO SELL SHARES
- ------------------
You can sell some or all of your Fund shares at any time. If you sell Class A,
Class B or Class C shares, your net sale proceeds are reduced by the amount of
any applicable CDSC. Your shares will be sold at the next price calculated after
we receive your order to sell as described below.
OPTIONS PROCEDURES
- --------------------------------------------------------------------------------
Contact Your To sell your shares, simply call your Morgan Stanley Dean
Financial Advisor Witter Financial Advisor or other authorized financial
representative.
----------------------------------------------------------
Payment will be sent to the address to which the account
is registered or deposited in your brokerage account.
- --------------------------------------------------------------------------------
By Letter You can also sell your shares by writing a "letter of
instruction" that includes:
o your account number;
o the dollar amount or the number of shares you wish
to sell;
o the Class of shares you wish to sell; and
o the signature of each owner as it appears on the
account.
----------------------------------------------------------
If you are requesting payment to anyone other than the
registered owner(s) or that payment be sent to any address
other than the address of the registered owner(s) or
pre-designated bank account, you will need a signature
guarantee. You can obtain a signature guarantee from an
eligible guarantor acceptable to Morgan Stanley Dean
Witter Trust FSB. (You should contact Morgan Stanley Dean
Witter Trust FSB at (800) 869-NEWS for a determination as
to whether a particular institution is an eligible
guarantor.) A notary public cannot provide a signature
guarantee. Additional documentation may be required for
shares held by a corporation, partnership, trustee or
executor.
----------------------------------------------------------
Mail the letter to Morgan Stanley Dean Witter Trust FSB at
P.O. Box 983, Jersey City, New Jersey 07303. If you hold
share certificates, you must return the certificates,
along with the letter and any required additional
documentation.
----------------------------------------------------------
A check will be mailed to the name(s) and address in which
the account is registered, or otherwise according to your
instructions.
- --------------------------------------------------------------------------------
Systematic If your investment in all of the Morgan Stanley Dean
Withdrawal Plan Witter Family of Funds has a total market value of at
least $10,000, you may elect to withdraw amounts of $25 or
more, or in any whole percentage of a Fund's balance
(provided the amount is at least $25), on a monthly,
quarterly, semi-annual or annual basis, from any Fund with
a balance of at least $1,000. Each time you add a Fund to
the plan, you must meet the plan requirements.
----------------------------------------------------------
Amounts withdrawn are subject to any applicable CDSC. A
CDSC may be waived under certain circumstances. See the
Class B waiver categories listed in the "Share Class
Arrangements" section of this Prospectus.
----------------------------------------------------------
To sign up for the Systematic Withdrawal Plan, contact
your Morgan Stanley Dean Witter Financial Advisor or call
(800) 869-NEWS. You may terminate or suspend your plan at
any time. Please remember that withdrawals from the plan
are sales of shares, not Fund "distributions," and
ultimately may exhaust your account balance. The Fund may
terminate or revise the plan at any time.
- --------------------------------------------------------------------------------
13
<PAGE>
Payment for Sold Shares. After we receive your complete instructions to sell as
described above, a check will be mailed to you within seven days, although we
will attempt to make payment within one business day. Payment may also be sent
to your brokerage account.
Payment may be postponed or the right to sell your shares suspended, under
unusual circumstances. If you request to sell shares that were recently
purchased by check, payment of the sale proceeds may be delayed for the minimum
time needed to verify that the check has been honored (not more than fifteen
days from the time we receive the check).
Reinstatement Privilege. If you sell Fund shares and have not previously
exercised the reinstatement privilege, you may, within 35 days after the date of
sale, invest any portion of the proceeds in the same Class of Fund shares at
their net asset value and receive a pro rata credit for any CDSC paid in
connection with the sale.
Involuntary Sales. The Fund reserves the right, on sixty days' notice, to sell
the shares of any shareholder (other than shares held in an IRA or 403(b)
Custodial Account) whose shares, due to sales by the shareholder, have a value
below $100, or in the case of an account opened through EasyInvest,SM if after
12 months the shareholder has invested less than $1,000 in the account.
However, before the Fund sells your shares in this manner, we will notify you
and allow you sixty days to make an additional investment in an amount that will
increase the value of your account to at least the required amount before the
sale is processed. No CDSC will be imposed on any involuntary sale.
Margin Accounts. Certain restrictions may apply to Fund shares pledged in margin
accounts with Dean Witter Reynolds or another authorized broker-dealer of Fund
shares. If you hold Fund shares in this manner, please contact your Morgan
Stanley Dean Witter Financial Advisor or other authorized financial
representative for more details.
14
<PAGE>
[GRAPHIC OMITTED]
DISTRIBUTIONS
- -------------
The Fund passes substantially all of its earnings from income and capital gains
along to its investors as "distributions." The Fund earns interest from
fixed-income investments. These amounts are passed along to Fund shareholders as
"income dividend distributions." The Fund realizes capital gains whenever it
sells securities for a higher price than it paid for them. These amounts may be
passed along as "capital gain distributions."
(sidebar)
TARGETED DIVIDENDSSM
You may select to have your Fund distributions automatically invested in other
Classes of Fund shares or Classes of another Morgan Stanley Dean Witter Fund
that you own. Contact your Morgan Stanley Dean Witter Financial Advisor for
further information about this service.
(end sidebar)
The Fund declares income dividends separately for each Class. Distributions paid
on Class A and Class D shares will be higher than for Class B and Class C
because distribution fees that Class B and Class C pay are higher. Normally,
income dividends are declared on each day the New York Stock Exchange is open
for business, and distributed monthly, and capital gains are distributed at
least annually in December. The Fund, however, may retain and reinvest any
long-term capital gains. The Fund may at times make payments from sources other
than income or capital gains that represent a return of a portion of your
investment.
Distributions are reinvested automatically in additional shares of the same
Class and automatically credited to your account, unless you request in writing
that all distributions be paid in cash. If you elect the cash option, processing
of your dividend checks begins immediately following the monthly payment date,
and the Fund will mail a monthly dividend check to you normally during the first
seven days of the following month. No interest will accrue on uncashed checks.
If you wish to change how your distributions are paid, your request should be
received by the Fund's transfer agent, Morgan Stanley Dean Witter Trust FSB, at
least five business days prior to the record date of the distributions.
[GRAPHIC OMITTED]
TAX CONSEQUENCES
- ----------------
As with any investment, you should consider how your Fund investment will be
taxed. The tax information in this Prospectus is provided as general
information. You should consult your own tax professional about the tax
consequences of an investment in the Fund.
You need to be aware of the possible tax consequences when:
o The Fund makes distributions; and
o You sell Fund shares, including an exchange to another Morgan Stanley
Dean Witter Fund.
15
<PAGE>
Taxes on Distributions. Your income dividend distributions are normally exempt
from federal income taxes -- to the extent they are derived from municipal
obligations. Income derived from other portfolio securities may be subject to
federal, state and/or local income taxes.
Income derived from some municipal securities is subject to the federal
"alternative minimum tax." Certain tax-exempt securities whose proceeds are used
to finance private, for-profit organizations are subject to this special tax
system that ensures that individuals pay at least some federal taxes. Although
interest on these securities is generally exempt from federal income tax, some
taxpayers who have many tax deductions or exemptions nevertheless may have to
pay tax on the income.
If you borrow money to purchase shares of the Fund, the interest on the borrowed
money is generally not deductible for personal income tax purposes.
If the Fund makes any capital gain distributions, those distributions will
normally be subject to federal income tax when they are paid, whether you take
them in cash or reinvest them in the Fund shares. Any short-term capital gain
distributions are taxable to you as long-term capital gains, no matter how long
you have owned shares in the Fund.
The Fund may derive gains in part from municipal obligations the Fund purchased
below their principal or face values. All, or a portion, of these gains may be
taxable to you as ordinary income rather than capital gains.
Taxes on Sales. Your sale of Fund shares normally is subject to federal and
state income tax and may result in a taxable gain or loss to you. A sale also
may be subject to local income tax. Your exchange of Fund shares for shares of
another Morgan Stanley Dean Witter Fund is treated for tax purposes like a sale
of your original shares and a purchase of your new shares. Thus, the exchange
may, like a sale, result in a taxable gain or loss to you and will give you a
new tax basis for your new shares.
When you open your Fund account, you should provide your social security or tax
identification number on your investment application. By providing this
information, you will avoid being subject to a federal backup withholding tax of
31% on taxable distributions and redemption proceeds. Any withheld amount would
be sent to the IRS as an advance tax payment.
16
<PAGE>
[GRAPHIC OMITTED]
SHARE CLASS ARRANGEMENTS
- ------------------------
The Fund offers several Classes of shares having different distribution
arrangements designed to provide you with different purchase options according
to your investment needs. Your Morgan Stanley Dean Witter Financial Advisor or
other authorized financial representative can help you decide which Class may be
appropriate for you.
The general public is offered three Classes: Class A shares, Class B shares and
Class C shares, which differ principally in terms of sales charges and ongoing
expenses. A fourth Class, Class D shares, is offered only to a limited category
of investors. Shares that you acquire through reinvested distributions will not
be subject to any front-end sales charge or CDSC -- contingent deferred sales
charge. Sales personnel may receive different compensation for selling each
Class of shares. The sales charges applicable to each Class provide for the
distribution financing of shares of that Class.
The chart below compares the sales charge and annual 12b-1 fee applicable to
each Class:
- --------------------------------------------------------------------------------
CLASS SALES CHARGE ANNUAL 12B-1 FEE
- --------------------------------------------------------------------------------
A Maximum 4.25% initial sales charge reduced for
purchases of $25,000 or more; shares sold without
an initial sales charge are generally subject to a
1.0% CDSC during the first year 0.25%
- --------------------------------------------------------------------------------
B Maximum 5.0% CDSC during the first year decreasing to
0% after six years 0.60%
- --------------------------------------------------------------------------------
C 1.0% CDSC during the first year 0.70%
- --------------------------------------------------------------------------------
D None None
- --------------------------------------------------------------------------------
CLASS A SHARES Class A shares are sold at net asset value plus an initial sales
charge of up to 4.25%. The initial sales charge is reduced for purchases of
$25,000 or more according to the schedule below. Investments of $1 million or
more are not subject to an initial sales charge, but are generally subject to a
contingent deferred sales charge, or CDSC, of 1.0% on sales made within one year
after the last day of the month of purchase. The CDSC will be assessed in the
same manner and with the same CDSC waivers as with Class B shares. Class A
shares are also subject to a distribution (12b-1) fee of up to 0.25% of the
average daily net assets of the Class.
17
<PAGE>
The offering price of Class A shares includes a sales charge (expressed as a
percentage of the offering price) on a single transaction as shown in the
following table:
(sidebar)
FRONT-END SALES CHARGE OR FSC
An initial sales charge you pay when purchasing Class A shares that is based on
a percentage of the offering price. The percentage declines based upon the
dollar value of Class A shares you purchase. We offer three ways to reduce your
Class A sales charges -- the Combined Purchase Privilege, Right of Accumulation
and Letter of Intent.
(end sidebar)
<TABLE>
<CAPTION>
FRONT-END SALES CHARGE
----------------------------------------------
AMOUNT OF PERCENTAGE OF APPROXIMATE PERCENTAGE
SINGLE TRANSACTION PUBLIC OFFERING PRICE OF AMOUNT INVESTED
- -------------------------------------------------------------------------------------
<S> <C> <C>
Less than $25,000 4.25% 4.44%
- -------------------------------------------------------------------------------------
$25,000 but less than $50,000 4.00% 4.17%
- -------------------------------------------------------------------------------------
$50,000 but less than $100,000 3.50% 3.63%
- -------------------------------------------------------------------------------------
$100,000 but less than $250,000 2.75% 2.83%
- -------------------------------------------------------------------------------------
$250,000 but less than $1 million 1.75% 1.78%
- -------------------------------------------------------------------------------------
$1 million and over 0 0
- -------------------------------------------------------------------------------------
</TABLE>
The reduced sales charge schedule is applicable to purchases of Class A shares
in a single transaction by:
o A single account (including an individual, trust or fiduciary account).
o Family member accounts (limited to husband, wife and children under the age
of 21).
o Pension, profit sharing or other employee benefit plans of companies and
their affiliates.
o Tax-exempt organizations.
o Groups organized for a purpose other than to buy mutual fund shares.
Combined Purchase Privilege. You also will have the benefit of reduced sales
charges by combining purchases of Class A shares of the Fund in a single
transaction with purchases of Class A shares of other Multi-Class Funds and
shares of FSC Funds.
Right of Accumulation. You also may benefit from a reduction of sales charges if
the cumulative net asset value of Class A shares of the Fund purchased in a
single transaction, together with shares of other Funds you currently own which
were previously purchased at a price including a front-end sales charge
(including shares acquired through reinvestment of distributions), amounts to
$25,000 or more. Also, if you have a cumulative net asset value of all your
Class A and Class D shares equal to at least $5 million (or $25 million for
certain employee benefit plans), you are eligible to purchase Class D shares of
any Fund subject to the Fund's minimum initial investment requirement.
You must notify your Morgan Stanley Dean Witter Financial Advisor or other
authorized financial representative (or Morgan Stanley Dean Witter Trust FSB if
you purchase directly through the Fund), at the time a purchase order is placed,
that the purchase
18
<PAGE>
qualifies for the reduced charge under the Right of Accumulation. Similar
notification must be made in writing when an order is placed by mail. The
reduced sales charge will not be granted if: (i) notification is not furnished
at the time of the order; or (ii) a review of the records of Dean Witter
Reynolds or other authorized dealer of Fund shares or the Fund's transfer agent
does not confirm your represented holdings.
Letter of Intent. The schedule of reduced sales charges for larger purchases
also will be available to you if you enter into a written "letter of intent." A
letter of intent provides for the purchase of Class A shares of the Fund or
other Multi-Class Funds and/or shares of FSC Funds within a thirteen-month
period. The initial purchase under a letter of intent must be at least 5% of the
stated investment goal. To determine the applicable sales charge reduction, you
may also include: (1) the cost of shares of other Morgan Stanley Dean Witter
Funds which were previously purchased at a price including a front-end sales
charge during the 90-day period prior to the distributor receiving the letter of
intent, and (2) the cost of shares of other Funds you currently own acquired in
exchange for shares of Funds purchased during that period at a price including a
front-end sales charge. You can obtain a letter of intent by contacting your
Morgan Stanley Dean Witter Financial Advisor or other authorized financial
representative, or by calling (800) 869-NEWS. If you do not achieve the stated
investment goal within the thirteen-month period, you are required to pay the
difference between the sales charges otherwise applicable and sales charges
actually paid.
Other Front-End Sales Charge Waivers. In addition to investments of $1 million
or more, your purchase of Class A shares is not subject to a front-end sales
charge (or a CDSC upon sale) if your account qualifies under one of the
following categories:
o A trust for which Morgan Stanley Dean Witter Trust FSB provides
discretionary trustee services.
o Persons participating in a fee-based investment program (subject to all of
its terms and conditions, including mandatory sale or transfer restrictions
on termination) approved by the Fund's distributor pursuant to which they
pay an asset-based fee for investment advisory, administrative and/or
brokerage services.
o A client of a Morgan Stanley Dean Witter Financial Advisor who joined us
from another investment firm within six months prior to the date of purchase
of Fund shares, and you used the proceeds from the sale of shares of a
proprietary mutual fund of that Financial Advisor's previous firm that
imposed either a front-end or deferred sales charge to purchase Class A
shares, provided that: (1) you sold the shares not more than 60 days prior
to the purchase of fund shares, and (2) the sale proceeds were maintained in
the interim in cash or a money market fund.
o Current or retired Directors/Trustees of the Morgan Stanley Dean Witter
Funds, such persons' spouses and children under the age of 21, and trust
accounts for which any of such persons is a beneficiary.
19
<PAGE>
o Current or retired directors, officers and employees of Morgan Stanley Dean
Witter & Co. and any of its subsidiaries, such persons' spouses and children
under the age of 21, and trust accounts for which any of such persons is a
beneficiary.
CLASS B SHARES Class B shares are offered at net asset value with no initial
sales charge but are subject to a contingent deferred sales charge, or CDSC, as
set forth in the table below. For the purpose of calculating the CDSC, shares
are deemed to have been purchased on the last day of the month during which they
were purchased.
(sidebar)
CONTINGENT DEFERRED SALES CHARGE OR CDSC
A fee you pay when you sell shares of certain Morgan Stanley Dean Witter Funds
purchased without an initial sales charge. This fee declines the longer you hold
your shares as set forth in the table.
(end sidebar)
<TABLE>
<CAPTION>
CDSC AS A PERCENTAGE
YEAR SINCE PURCHASE PAYMENT MADE OF AMOUNT REDEEMED
- ----------------------------------------------------------
<S> <C>
First 5.0%
- ----------------------------------------------------------
Second 4.0%
- ----------------------------------------------------------
Third 3.0%
- ----------------------------------------------------------
Fourth 2.0%
- ----------------------------------------------------------
Fifth 2.0%
- ----------------------------------------------------------
Sixth 1.0%
- ----------------------------------------------------------
Seventh and thereafter None
- ----------------------------------------------------------
</TABLE>
Each time you place an order to sell or exchange shares, shares with no CDSC
will be sold or exchanged first, then shares with the lowest CDSC will be sold
or exchanged next. For any shares subject to a CDSC, the CDSC will be assessed
on an amount equal to the lesser of the current market value or the cost of the
shares being sold. A lower CDSC schedule applies in most cases to shares of the
Fund acquired in connection with the reorganization of Dean Witter National
Municipal and the Fund on November 7, 1997.
CDSC Waivers. A CDSC, if otherwise applicable, will be waived in the case of:
o Sales of shares held at the time you die or become disabled (within the
definition in Section 72(m)(7) of the Internal Revenue Code which relates to
the ability to engage in gainful employment), if the shares are: (i)
registered either in your name (not a trust) or in the names of you and your
spouse as joint tenants with right of survivorship; or (ii) held in a
qualified corporate or self-employed retirement plan, IRA or 403(b)
Custodial Account, provided in either case that the sale is requested within
one year of your death or initial determination of disability.
o Sales in connection with the following retirement plan "distributions": (i)
lump-sum or other distributions from a qualified corporate or self-employed
retirement plan following retirement (or, in the case of a "key employee" of
a "top heavy" plan, following attainment of age 59 1 /2); (ii) distributions
from an IRA or 403(b) Custodial Account following attainment of age 59 1 /2;
or (iii) a tax-free return of an excess IRA contribution (a "distribution"
does not include a direct transfer of IRA, 403(b) Custodial Account or
retirement plan assets to a successor custodian or trustee).
20
<PAGE>
o Sales of shares in connection with the Systematic Withdrawal Plan of up to
12% annually of the value of each Fund from which plan sales are made. The
percentage is determined on the date you establish the Systematic Withdrawal
Plan and based on the next calculated share price. You may have this CDSC
waiver applied in amounts up to 1% per month, 3% per quarter, 6%
semi-annually or 12% annually. Shares with no CDSC will be sold first,
followed by those with the lowest CDSC. As such, the waiver benefit will be
reduced by the amount of your shares that are not subject to a CDSC. If you
suspend your participation in the plan, you may later resume plan payments
without requiring a new determination of the account value for the 12% CDSC
waiver.
All waivers will be granted only following the Distributor receiving
confirmation of your entitlement. If you believe you are eligible for a CDSC
waiver, please contact your Financial Advisor or call (800) 869-NEWS.
Distribution Fee. Class B shares are also subject to an annual 12b-1 fee of
0.60% of the average daily net assets of Class B.
Conversion Feature. After ten (10) years, Class B shares will convert
automatically to Class A shares of the Fund with no initial sales charge. The
ten year period runs from the last day of the month in which the shares were
purchased, or in the case of Class B shares acquired through an exchange, from
the last day of the month in which the original Class B shares were purchased;
the shares will convert to Class A shares based on their relative net asset
values in the month following the ten year period. At the same time, an equal
proportion of Class B shares acquired through automatically reinvested
distributions will convert to Class A shares on the same basis. (Class B shares
held before May 1, 1997, however, will convert to Class A shares in May 2007.)
Currently, the Class B share conversion is not a taxable event; the conversion
feature may be cancelled if it is deemed a taxable event in the future by the
Internal Revenue Service.
If you exchange your Class B shares for shares of a Money Market Fund, No-Load
Fund or Short-Term U.S. Treasury Trust, the holding period for conversion is
frozen as of the last day of the month of the exchange and resumes on the last
day of the month you exchange back into Class B shares.
Exchanging Shares Subject to a CDSC. There are special considerations when you
exchange Fund shares that are subject to a CDSC. When determining the length of
time you held the shares and the corresponding CDSC rate, any period (starting
at the end of the month) during which you held shares of a fund that does not
charge a CDSC will not be counted. Thus, in effect the "holding period" for
purposes of calculating the CDSC is frozen upon exchanging into a fund that does
not charge a CDSC.
21
<PAGE>
For example, if you held Class B shares of the Fund for one year, exchanged to
Class B of another Morgan Stanley Dean Witter Multi-Class Fund for another year,
then sold your shares, a CDSC rate of 4% would be imposed on the shares based on
a two year holding period -- one year for each Fund. However, if you had
exchanged the shares of the Fund for a Money Market Fund (which does not charge
a CDSC) instead of the Multi-Class Fund, then sold your shares, a CDSC rate of
5% would be imposed on the shares based on a one year holding period. The one
year in the Money Market Fund would not be counted. Nevertheless, if shares
subject to a CDSC are exchanged for a Fund that does not charge a CDSC, you will
receive a credit when you sell the shares equal to the distribution (12b-1)
fees, if any, you paid on those shares while in that Fund up to the amount of
any applicable CDSC.
In addition, shares that are exchanged into or from a Morgan Stanley Dean Witter
Fund subject to a higher CDSC rate will be subject to the higher rate, even if
the shares are re-exchanged into a Fund with a lower CDSC rate.
CLASS C SHARES Class C shares are sold at net asset value with no initial sales
charge but are subject to a CDSC of 1.0% on sales made within one year after the
last day of the month of purchase. The CDSC will be assessed in the same manner
and with the same CDSC waivers as with Class B shares.
Distribution Fee. Class C shares are subject to an annual distribution (12b-1)
fee of up to 0.70% of the average daily net assets of that Class. The Class C
shares' distribution fee may cause that Class to have higher expenses and pay
lower dividends than Class A or Class D shares. Unlike Class B shares, Class C
shares have no conversion feature and, accordingly, an investor that purchases
Class C shares may be subject to distribution (12b-1) fees applicable to Class C
shares for an indefinite period.
CLASS D SHARES Class D shares are offered without any sales charge on purchases
or sales and without any distribution (12b-1) fee. Class D shares are offered
only to investors meeting an initial investment minimum of $5 million and the
following investor categories:
o Investors participating in the Investment Manager's mutual fund asset
allocation program (subject to all of its terms and conditions, including
mandatory sale or transfer restrictions on termination) pursuant to which
they pay an asset-based fee.
o Persons participating in a fee-based investment program (subject to all of
its terms and conditions, including mandatory sale or transfer restrictions
on termination) approved by the Fund's distributor pursuant to which they
pay an asset-based fee for investment advisory, administrative and/or
brokerage services.
o Certain unit investment trusts sponsored by Dean Witter Reynolds.
o Certain other open-end investment companies whose shares are distributed by
the Fund's distributor.
22
<PAGE>
o Investors who were shareholders of the Dean Witter Retirement Series on
September 11, 1998 for additional purchases for their former Dean Witter
Retirement Series accounts.
Meeting Class D Eligibility Minimums. To meet the $5 million initial investment
to qualify to purchase Class D shares you may combine: (1) purchases in a single
transaction of Class D shares of the Fund and other Morgan Stanley Dean Witter
Multi-Class Funds and/or (2) previous purchases of Class A and Class D shares of
Multi-Class Funds and shares of FSC Funds you currently own, along with shares
of Morgan Stanley Dean Witter Funds you currently own that you acquired in
exchange for those shares.
NO SALES CHARGES FOR REINVESTED CASH DISTRIBUTIONS. If you receive a cash
payment representing an income dividend or capital gain and you reinvest that
amount in the applicable Class of shares by returning the check within 30 days
of the payment date, the purchased shares would not be subject to an initial
sales charge or CDSC.
PLAN OF DISTRIBUTION (RULE 12B-1 FEES) The Fund has adopted a Plan of
Distribution in accordance with Rule 12b-1 under the Investment Company Act of
1940 with respect to the distribution of Class A, Class B and Class C shares.
The Plan allows the Fund to pay distribution fees for the sale and distribution
of these shares. It also allows the Fund to pay for services to shareholders of
Class A, Class B and Class C shares. Because these fees are paid out of the
Fund's assets on an ongoing basis, over time these fees will increase the cost
of your investment in these Classes and may cost you more than paying other
types of sales charges.
23
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 fiscal years of the Fund. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate an investor would have earned or lost
on an investment in the Fund (assuming reinvestment of all dividends and
distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose report,
along with the Fund's financial statements, is included in the annual report,
which is available upon request.
<TABLE>
<CAPTION>
CLASS D
- ---------------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31 1998 1997* 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $12.08 $11.77 $12.09 $11.01 $12.41
- ---------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.62 0.63 0.65 0.67 0.70
Net realized and unrealized gain (loss) 0.10 0.36 (0.24) 1.19 (1.37)
- ---------------------------------------------------------------------------------------------------------
Total income (loss) from investment
operations 0.72 0.99 0.41 1.86 (0.67)
- ---------------------------------------------------------------------------------------------------------
Less dividends and distributions from:
Net investment income (0.62) (0.63) (0.65) (0.67) (0.70)
Net realized gain (0.17) (0.05) (0.08) (0.11) (0.03)
------ ------ ------ ------ ------
Total dividends and distributions (0.79) (0.68) (0.73) (0.78) (0.73)
- ---------------------------------------------------------------------------------------------------------
Net asset value, end of period 12.01 12.08 11.77 12.09 11.01
- ---------------------------------------------------------------------------------------------------------
TOTAL RETURN+ 6.11% 8.73% 3.61% 17.37% (5.55)%
- ---------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------------------------------------------------
Expenses 0.50%(1)(2) 0.49% 0.48% 0.48% 0.47%
- ---------------------------------------------------------------------------------------------------------
Net investment income 5.12%(2) 5.34% 5.52% 5.76% 6.02%
- ---------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------
Net assets, end of period, in millions $1,023 $1,097 $1,190 $1,325 $1,295
- ---------------------------------------------------------------------------------------------------------
Portfolio turnover rate 15% 16% 18% 21% 16%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
* Prior to July 28, 1997, the Fund issued one class of shares. All shares
of the Fund held prior to that date have been designated Class D shares.
+ Calculated based on the net asset value as of the last business day of
the period.
(1) Does not reflect the effect of expense offset of 0.01%.
(2) Reflects overall Fund ratios for investment income and non-class specific
expenses.
24
<PAGE>
<TABLE>
<CAPTION>
CLASS A
- ------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE PERIOD JULY 28, 1997*
SELECTED PER-SHARE DATA DECEMBER 31, 1998 THROUGH DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $12.09 $12.00
- ------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.59 0.25
Net realized and unrealized gain 0.10 0.14
-------- ---------
Total income from investment operations 0.69 0.39
- ------------------------------------------------------------------------------------------------
Less dividends and distributions from:
Net investment income (0.59) (0.25)
Net realized gain (0.17) (0.05)
-------- ---------
Total dividends and distributions (0.76) (0.30)
- ------------------------------------------------------------------------------------------------
Net asset value, end of period $12.02 $12.09
- ------------------------------------------------------------------------------------------------
TOTAL RETURN+ 5.86% 3.31%(1)
- ------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------------------------------
Expenses 0.74%(4)(5) 0.76%(2)(3)
- ------------------------------------------------------------------------------------------------
Net investment income 4.88%(5) 4.96%(2)
- ------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $15,041 $3,857
- ------------------------------------------------------------------------------------------------
Portfolio turnover rate 15% 16%
- ------------------------------------------------------------------------------------------------
</TABLE>
* Prior to July 28, 1997, the Fund issued one class of shares. All shares
of the Fund held prior to that date have been designated Class D shares.
+ Calculated based on the net asset value as of the last business day of
the period.
(1) Does not reflect the effect of expense offset of 0.01%.
(2) Reflects overall Fund ratios for investment income and non-class specific
expenses.
25
<PAGE>
<TABLE>
<CAPTION>
CLASS B
- ------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE PERIOD JULY 28, 1997*
SELECTED PER-SHARE DATA DECEMBER 31, 1998 THROUGH DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $12.14 $12.00
- ------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.55 0.23
Net realized and unrealized gain 0.10 0.19
-------- --------
Total income from investment operations 0.65 0.42
- ------------------------------------------------------------------------------------------------
Less dividends and distributions from:
Net investment income (0.55) (0.23)
Net realized gain (0.17) (0.05)
-------- --------
Total dividends and distributions (0.72) (0.28)
- ------------------------------------------------------------------------------------------------
Net asset value, end of period 12.07 12.14
- ------------------------------------------------------------------------------------------------
TOTAL RETURN+ 5.47% 3.57%(1)
- ------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------------------------------
Expenses 1.10%(4)(5) 1.14%(2)(3)
- ------------------------------------------------------------------------------------------------
Net investment income 4.52%(5) 4.87%(2)
- ------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $132,303 $95,573
- ------------------------------------------------------------------------------------------------
Portfolio turnover rate 15% 16%
- ------------------------------------------------------------------------------------------------
</TABLE>
* The date shares were first issued.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Does not reflect the effect of expense offset of 0.02%.
(4) Does not reflect the effect of expense offset of 0.01%.
(5) Reflects overall Fund ratios for investment income and non-class specific
expenses.
26
<PAGE>
<TABLE>
<CAPTION>
CLASS C
- ------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE PERIOD JULY 28, 1997*
SELECTED PER-SHARE DATA DECEMBER 31, 1998 THROUGH DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $12.11 $12.00
- ------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.53 0.23
Net realized and unrealized gain 0.10 0.16
--------- ---------
Total income from investment operations 0.63 0.39
- ------------------------------------------------------------------------------------------------
Less dividends and distributions from:
Net investment income (0.53) (0.23)
Net realized gain (0.17) (0.05)
--------- ---------
Total dividends and distributions (0.70) (0.28)
- ------------------------------------------------------------------------------------------------
Net asset value, end of period $12.04 $12.11
- ------------------------------------------------------------------------------------------------
TOTAL RETURN+ 5.36% 3.28%(1)
- ------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------------------------------
Expenses 1.20%(4)(5) 1.20%(2)(3)
- ------------------------------------------------------------------------------------------------
Net investment income 4.42%(5) 4.41%(2)
- ------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $7,599 $2,953
- ------------------------------------------------------------------------------------------------
Portfolio turnover rate 15% 16%
- ------------------------------------------------------------------------------------------------
</TABLE>
* The date shares were first issued.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Does not reflect the effect of expense offset of 0.02%.
(4) Does not reflect the effect of expense offset of 0.01%.
(5) Reflects overall Fund ratios for investment income and non-class specific
expenses.
27
<PAGE>
NOTES
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28
<PAGE>
MORGAN STANLEY DEAN WITTER
FAMILY OF FUNDS
The Morgan Stanley Dean Witter Family of Funds offers
investors a wide range of investment choices. Come on
in and meet the family!
- --------------------------------------------------------------------------------
GROWTH FUNDS
GROWTH FUNDS
Aggressive Equity Fund
American Opportunities Fund
Capital Growth Securities
Developing Growth Securities
Equity Fund
Growth Fund
Market Leader Trust
Mid-Cap Growth Fund
Special Value Fund
Value Fund
THEME FUNDS
Financial Services Trust
Health Sciences Trust
Information Fund
Natural Resource Development Securities
Precious Metals and Minerals Trust
GLOBAL/INTERNATIONAL FUNDS
Competitive Edge Fund - "Best Ideas" Portfolio
European Growth Fund
Fund of Funds - International Portfolio
Global Dividend Growth Securities
Global Utilities Fund
International SmallCap Fund
Japan Fund
Pacific Growth Fund
- --------------------------------------------------------------------------------
GROWTH & INCOME FUNDS
Balanced Growth Fund
Balanced Income Fund
Convertible Securities Trust
Dividend Growth Securities
Fund of Funds - Domestic Portfolio
Income Builder Fund
Mid-Cap Dividend Growth Securities
S&P 500 Index Fund
S&P 500 Select Fund
Strategist Fund
Value/Added Market Series/Equity Portfolio
THEME FUNDS
Global Utilities Fund
Real Estate Fund
Utilities Fund
- --------------------------------------------------------------------------------
INCOME FUNDS
GOVERNMENT INCOME FUNDS
Federal Securities Trust
Short-Term U.S. Treasury Trust
U.S. Government Securities Trust
DIVERSIFIED INCOME FUNDS
Diversified Income Trust
CORPORATE INCOME FUNDS
High Yield Securities
Intermediate Income Securities
Short-Term Bond Fund(NL)
GLOBAL INCOME FUNDS
World Wide Income Trust
TAX-FREE INCOME FUNDS
California Tax-Free Income Fund
Hawaii Municipal Trust(FSC)
Limited Term Municipal Trust(NL)
Multi-State Municipal Series Trust(FSC)
New York Tax-Free Income Fund
Tax-Exempt Securities Trust
- --------------------------------------------------------------------------------
MONEY MARKET FUNDS
TAXABLE MONEY MARKET FUNDS
Liquid Asset Fund(MM)
U.S. Government Money Market Trust(MM)
TAX-FREE MONEY MARKET FUNDS
California Tax-Free Daily Income Trust(MM)
New York Municipal Money Market Trust(MM)
Tax-Free Daily Income Trust(MM)
There may be funds created after this Prospectus was published. Please consult
the inside front cover of a new Fund's Prospectus for its designation, e.g.,
Multi-Class Fund or Money Market Fund.
Unless otherwise noted, each listed Morgan Stanley Dean Witter Fund, except for
Short-Term U.S. Treasury Trust, is a Multi-Class Fund. A Multi-Class Fund is a
mutual fund offering multiple Classes of shares. The other types of Funds are:
NL -- No-Load (Mutual) Fund; MM -- Money Market Fund; FSC -- A mutual fund sold
with a front-end sales charge and a distribution (12b-1) fee.
<PAGE>
- --------------------------------------------------------------------------------
PROSPECTUS - MAY 1, 1999
- --------------------------------------------------------------------------------
Additional information about the Fund's investments is available in the Fund's
Annual and Semi-Annual Reports to Shareholders. In the Fund's Annual Report, you
will find a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year. The
Fund's Statement of Additional Information also provides additional information
about the Fund. The Statement of Additional Information is incorporated herein
by reference (legally is part of this Prospectus). For a free copy of any of
these documents, to request other information about the Fund, or to make
shareholder inquiries, please call:
(800) 869-NEWS
You also may obtain information about the Fund by calling your Morgan Stanley
Dean Witter Financial Advisor or by visiting our Internet site at:
WWW.DEANWITTER.COM/FUNDS
Information about the Fund (including the Statement of Additional Information)
can be viewed and copied at the Securities and Exchange Commission's Public
Reference Room in Washington, DC. Information about the Reference Room's
operations may be obtained by calling the SEC at (800) SEC-0330. Reports and
other information about the Fund are available on the SEC's Internet site
(www.sec.gov), and copies of this information may be obtained, upon payment of
a duplicating fee, by writing the Public Reference Section of the SEC,
Washington, DC 20549-6009.
TICKER SYMBOLS:
Class A: TAXAX Class C: TAXCX
- ------------------ ------------------
Class B: TAXBX Class D: TAXDX
- ------------------ ------------------
(INVESTMENT COMPANY ACT FILE NO. 811-2979)
MORGAN STANLEY DEAN WITTER
-----------------------------------------------------------------
TAX-EXEMPT SECURITIES TRUST
[GRAPHIC OMITTED]
A MUTUAL FUND THAT SEEKS TO
PROVIDE A HIGH LEVEL OF CURRENT
INCOME EXEMPT FROM FEDERAL
INCOME TAX, CONSISTENT WITH
THE PRESERVATION OF CAPITAL
